John November 8, 2006
Cleveland, Georgia, 30528
STUDENT LOAN SCAM
I am writing this article because of a bad experience I am right now going through with my student loans. Due to a grade dispute, I recently withdrew from an online college (AIU-Online/American Intercontinental University). I knew my loans would be due and was prepared to make my payments. I have 3 loans. (2) Stafford Loans and a Sallie Mae.
The school's financial adviser had described all 3 loans to me as low interest government loans, which I had qualified for and was very lucky to receive. Because of this they would be easy to pay back. I had the 2 Stafford loans at 6% and the Sallie Mae at 8.25% interest. She then said 2 of the loans were unsubsidized. I asked her what that meant. She said that meant they could fluctuate up or down. I asked her which 2? She said 1 Stafford and the Sallie Mae. I asked her what of the other Stafford Loan? She said it was locked in at a fixed rate of 6%. I then told her I could not afford a loan over 9% interests. She said the way the market is going that both loans, would be going down, to maybe as low as 31/2 or 4% interest but if by some chance they did start to rise I could stop and reschedule classes for a later time or wait for the next semester to see if they go back down, then I could just pick up where I left off continuing the education. The loans are paid to us in installments. Either way it was a great opportunity for me.
My Complaint; When I finally received my statements the 2 Stafford Loans were as described but the Sallie Mae was at 18% interest and fluctuating. Since I do not understand banking terms very well I took it to a local credit union and asked their loan officer to explain it to me. She could not. She said she didn't quite understand it and asked me to go talk with a friend of hers that specializes in student loans for the Federal Government. She is a financial aid adviser at a local private college. Upon showing it to her, she turned it over to her boss. He then told me that Sallie Mae is not a Government entity, but a Private banking institution and that I had been deceived. Many people believe that because of the name Sallie Mae, like a Fannie Mae or Freddie Mac, that the Federal Government sponsors it. It is not, and if I were you, I would try to get this straightened out with the school. If that doesn't work then you should file a complaint with the Attorney Generals office. I thanked him and have been working excessively trying to get this matter resolved ever since.
AIU is denying everything as if they never tried to sell me the loans. They are denying ever speaking to me about the loans although I spent considerable time with their advisers on the phone prior to entering the school. Their answer, you signed a Promissory Note, and a Truth in Lending Agreement, now you have to pay it. Thus far, a signed promissory note or agreement has yet to be found on the Sallie Mae. I called Sallie Mae. They give me the same answer so I asked them for a copy of my promissory note. They said they were going to put one in the mail. That has been 3 weeks ago. I have still not seen one where I have signed it. I have received an E-mail from both places of an unsigned promissory note with no signature but just my basic information typed in which is supposed to be a copy, which anyone could have typed. They all have this information.
Since then, I have spent many sleepless nights web-searching both the school and the bank. I have read hundreds of sad and horrific stories from people's families where a family member had committed suicide. Others, losing everything they owned from the lure of more money that a college degree could provide. There have been numerous complaints filed against AIU and Sallie Mae for all types of illegal practices. One involves kickbacks from private banks to schools in cash if they can meet a quota to sell so many of their loans. I have also found that Sallie Mae being the largest loan supplier, four times larger than the nearest competitor, is also the largest provider of kickbacks to these schools. Sallie Mae uses a loophole called the School As Lender program sanctioned by Congress. It is legal. Basically, the School As Lender program allows Sallie Mae to pay universities money to help administer the Sallie Mae loans. In return the universities try to sell the Sallie Mae loan to prospective students. I asked AIU if they participated in such a program? They flatly said no.
There are a lot of things that have complicated this situation even more, and makes it harder for me to get to the truth.
1. FAFSA is the government department that determines if you qualify for a government loan. Like most government programs, they want all of your personal information to process your qualifications but they do not give you the results. FAFSA only says I am eligible for Federal Aid. All I received was a code that said my Extended Family Contribution (EFC) was 7101, whatever that means. I can not get any more answers from FAFSA. They will not tell me what types of loans I did actually qualify for such as a Stafford or Pell Grant, etc. They said the university financial aid office would do this. Therefore I was sold 3 low interest government backed loans that I was lucky to have qualified for, for lower income people, although one was really private. I had just gotten over an extended illness and was unemployed at the time of the loans.
2. I asked the school, since I qualified for low interest, low income loans. Why would I sign a paper for a loan of 18% and why would you attempt to sell me such a loan knowing my financial situation, extended illness, and unemployment status, and also after we worked together to determine that I could not afford a loan over 9%? I have 3 statements. If you lay them side by side, they say 6%, 6%, and then one 18%. Their Reply: You signed the note, you have to pay it.
3. I told Sallie Mae that I would be willing to pay the loan at the previously agreed upon 8.25%. But I will not make one single payment on an 18% loan that was brought about by fraud and deceit and misrepresented to me. They responded that since the loan was private and not federal it fell under the auspices of the 1965 Higher Education Act and I have no choice but to pay. Although I was led to believe it was Federal.
4. The way I had decided not to receive a loan over 9% was with the help of the financial aid adviser at the school. She sent me to the Sallie Mae website to use their calculator. This would give me an idea of how much my loan would be and what my payments would cost to see what I could afford. You can still do this. Sallie Mae list's no other fees that could possibly be connected with the loan on this sight.
5. My Statement: It reads, The Current Index is 8.25%. The current margin is 9.85% therefore my current interest rate is 18.125%. I also have what is called an Accrued Unpaid Interest of $860.53 that began the day I received the loan. It has never stopped growing. Is this an extra interest payment being added to my already high 18.125% interest? So now I have 2 interest payments to make to Sallie Mae.
6. My Loan: Loan Balance $5,996.38. Accrued Unpaid Interest $860.53. Total Amount Financed $6, 826.91. Finance Charge $13,096.21. Number of payments 179 months at $110.70 a month for a total cost of $19,923.82. (NOTE) This is for this loan. I still have the 2 Stafford Loans to pay.
7. The Promissory note describing the 2 Stafford Loans is on 1 page each. The Sallie Mae Promissory Note includes 10 pages of confusing fine print that I had the financial aid adviser explain to me in English because I did not understand the first word of it. The main objective was a loan not over 9%. That is what I thought I had achieved.
8. I have since been told by Sallie Mae my loan can go as high as 21%. I have been reading reports and complaints of people having to pay as much as 28% interest. Sallie Mae has told me they have different rates, that it is determined by the laws of each individual state. They are able to sell my loan to another banking institution in another state with a higher interest rate without my knowledge.
9. Public, Private Non-Profit, Private For-Profit: Before initial enrollment I did the stats and projections for the student drop-out rates in colleges. All of the stats I could find were done on Public Schools and Private Non-Profit Schools. I had never heard of a Private For-Profit school. There is no accurate data whatsoever to show the actual graduation rate of Private For- Profit schools. Any school that tells you they have a 80-90% graduation rate is lying. There are many different ways to compute this, the school of course is going to show you the best. According to Department Of Education, and the Digest of Education Statistics only about 50% of all students end up graduating from Public and Private Non-Profit Schools who have attempted a 4-year degree. That is about a 50% dropout rate. Statistics show if you are attempting to go back to school after the age of 25, your chances of graduating becomes more difficult. You have a 12% chance of graduating if you are over 25 years old. If you are in your 40's, as my case, the chances of graduating drops to below 7%. For Private For-Profit schools, the stats are even lower. In other words, over 9 out of every 10 older students over the age of 40 years old will eventually dropout of school and will be stuck repaying on school loans. This itself for any type of loan would be very, very, very, high risk.
10. Go to your bank and attempt to get a $2,500 loan for anything. First even if you bank there, you still have to prove you can pay back the loan, or put up some type of collateral to cover the loan. There is no such collateral to provide for a student loan. You can be broke, unemployed, on disability, on social security, no home, no car, no nothing and still receive a loan for education. The only guarantee is you will graduate and then and only then be able to pay the bank back if you succeed to get a good paying job. The bank knows the government will compensate them for their losses, their collection fees, etc. This is your tax money. Some students have loans over $100,000 dollars.
11. An easier way to put this is go to your bank, and try to get a loan of any kind with nothing to back you up. You won't get one period. Especially a signature loan of any value.
12. Why should a bank, or financial institution have the right to try to collect on a loan that the chances of being paid back, statistics show is less than 7% as in my case? They never should have made such a loan?
13. Why should a bank, or financial institution have the right to hurt a person's credit when they are the one's that made a bad loan to start with?
14. Why should a bank or financial institution have the right to hurt your credit, go through the collections process, make harassing phone calls during all hours of the day or night, and send out letters of harassment for collection when no collateral was put up to start with and it was a very, very, very, high risk loan? Do they get to bust our knee caps too, is it government sanctioned also?
So far I have contacted the Department of Education, The Federal Trade Commission, and the Attorney Generals office to file complaints. All at this time are still being investigated
Since investigating this practice I have learned 60 minutes just did a special on it. There has also been a report on CNN. There are several websites that people have reported this and other problems to on both AIU and Sallie Mae. Some Sites to read some horrific stories and place your own story or complaint. 1. studentloanjustice.org 2. ripoffreport.com 3. community.lawyers.com 4. consumeraffairs.com.
It is interesting to note that on ripoffreport.com of all the thousands of Schools and Universities in the United States over half of the complaints belong to 2 schools. These 2 schools are AIU-Online aka: American Intercontinental University and The University of Phoenix that I always receive pop-up ads from. There are hundreds of complaints on the site against these 2 schools. (NOTE) I have no connection with the Phoenix school. I am just listing the facts.
There are numerous complaints against Sallie Mae aka: SLM Corporation on all of these sites also. According to a report in CBS News since 2002, the company has paid Congressman and Political Action Committees nearly 3 million dollars including more than $200,000 to House Majority Leader John Boehner and his PAC. The collusion between Sallie Mae and the Federal Government seems to be a win, win situation for both institutions, but not such a good situation for students. Sallie Mae has lobbied consistently and successfully in the government circle. Each time legislation has been brought up to help students the bill is quickly killed by Sallie Mae's powerful lobby.
The collusion between Sallie Mae and the Federal Government has put thousands if not millions of people in debt in this country. It has made Sallie Mae one of the most profitable companies in the world, and has left people committing suicide, losing everything they own, going homicidal, and giving all of them bad credit, and putting them and their families forever in a sea of debt. Something needs to change. I don't know if it's the laws themselves, or the way they are handled. Why the complication?
When I was given my loan. Why didn't they just say? Mr. Liles, here is a loan offer from Sallie Mae. It is 18% interest. We know you can't afford anything over 9% interests, so let's look somewhere else. This never happened.
Working together, AIU and Sallie Mae make a good team conning people and misrepresenting the facts committing fraud and possibly even racketeering against unknowing prospective students.
If anyone can help me with this situation, I am willing to sue the %#@& out of either party. I am already receiving notices on how they are going to start by killing my credit. This is going to destroy me and put hardship on every financial decision I will have to make with my family from providing my kid's with a decent school lunch, involving them in any extra curricular activities or sports, wondering how I can buy a used or new vehicle with a shot credit report and even payments at the pump. Thank You.
PS. To Prospective Students,
Please do not go to AIU, The University of Phoenix, or get a loan thru a Sallie Mae sponsored bank or any other private bank without first reading the complaints at the sights listed above. Do not get a private loan period, unless everything is laid out on 1 or 2 pages in understandable English, in terms you understand, and don't count on the advice of a financial aid adviser of a Private For-Profit School like AIU. The term Private For-Profit status of any school should speak for itself and the way they do their business. Thanks,